Verizon Sees 2011 EPS Growth of 5 to 8 Percent

Verizon Communications Inc. VZ has positioned itself to "kick into a higher gear as we go forward," Lowell McAdam, Verizon president and chief operating officer, told investors and analysts at a conference today. The conference included a discussion of the company's 2010 results and a strategic and financial overview of 2011 and beyond. Earlier today, the company reported 2010 total operating revenues of $106.6 billion. Excluding results from assets that have since been divested, 2010 revenues were $104.4 billion, or a 1.9 percent increase from 2009 revenues of $102.5 billion on a comparable basis (non-GAAP). Fran Shammo, Verizon executive vice president and chief financial officer, said that the company sees accelerated top-line revenue growth rates in the range of 4 percent to 8 percent in 2011. He said that this outlook is based on the continued growth in strategic businesses -- aided by Verizon's prior investments in technology; sales and recurring revenues from the newly announced Verizon iPhone and LTE wireless devices; continued growth in revenues from FiOS and strategic business services; and a stable to improving economic environment. With the introduction of the iPhone and LTE devices, Verizon said it sees smartphone penetration rates increasing from a current 26 percent to more than 50 percent by the end of 2011. Shammo said Verizon Wireless margins have demonstrated years of sustained excellent performance, and improvements in wireline margins are gaining momentum. He added that the company plans to maintain a disciplined program for capital investments and driving cost efficiencies. Verizon reported capital expenditures of $16.5 billion in 2010, and Shammo said the company expects capex to be flat or slightly down from this level in 2011, with improved return on invested capital. Shammo said the company expects to maintain strong cash flow with continued gains in earnings per share (EPS) in 2011, including the impact on wireless margins from expected gains in market share from iPhone sales. Earlier today, Verizon reported 2010 earnings of 90 cents per share and $33.4 billion in cash flow from operations. On a comparable and adjusted basis (non-GAAP, adjusting for non-operational items and removing impacts from businesses since divested), 2010 EPS was $2.08. Shammo said that from this baseline Verizon sees EPS growth of 5 percent to 8 percent in 2011.